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Pay-by-mile car insurance subscription service launched by RAC

Vicky Shaw, PA Personal Finance Correspondent
·2-min read

A “no-ties” monthly car insurance subscription service is being offered by the RAC, in a move it says could shake up the market and reduce motorists’ costs.

Drivers who travel fewer miles, perhaps because of the Covid-19 pandemic, may potentially be able to save money.

Rather than being tied to an annual contract, they will pay a monthly subscription, and charges will also depend on the actual number of miles they drive.

The product is aimed at people who drive fewer than 6,000 miles a year.

Pay by Mile from RAC Car Insurance will charge motorists an agreed per mile cost for the miles they drive, on top of a set monthly fee covering when the car is parked.

There will also be an initial one-off £50 “activation fee”. Cover will be fully comprehensive.

Mark Godfrey, managing director of RAC Insurance, said customers will not be locked into a 12-month contract and will be free to leave without notice if they find a better deal elsewhere.

He said: “Car insurance is a market that’s been ripe for a shake-up for some time, so we’re thrilled to introduce a truly pioneering new product which is ideally suited to drivers who don’t do that many miles.

“With a standard car insurance policy, drivers are expected to estimate how many miles they expect to drive from the outset, whether or not they cover this distance during the policy year or not.

“For people who don’t drive very regularly or only ever go short distances, this could result in a premium that seems overly expensive.

“Pay by Mile from RAC Car Insurance offers something different. After paying a one-off £50 activation fee and a small set monthly sum that covers the vehicle for all the time it’s parked, drivers just pay a clear ‘per mile’ price of as a little as 4p for every mile they actually drive.

“This way, motorists save money for whenever they don’t, or can’t, drive.

“The impact of the coronavirus pandemic on driving patterns means it feels like this product has never been more relevant.”

He added: “With monthly, no-ties subscriptions now the norm for so many services we felt the time was right to bring this approach to car insurance.”

Policies will be underwritten by Highway Insurance Company Limited, part of LV=, and the RAC has also partnered with tech company Wrisk.

Customers need to stick a “drive tag” to their windscreen, pair it with their smartphone, and their miles will be recorded.

There is a minimum £250 excess with the insurance policy.